Saturday, July 4, 2015

Six Tried-and-True Principles for Any Investor

Disclaimer: This article came from Allianz USA for reference purpose only. for more information visit: http://www.allianzusa.com/investments/investing-insights/timeless-investing-principles/

As investors, it's important that we never stop learning because markets never stop changing. But having a firm grasp of some investing fundamentals can help you set realistic goals and stick to your financial plan.

The professionals at Allianz Global Investors have compiled this set of time-tested investing principals which they've used to guide their success:

1. Keep a Long-Term View
Keep in mind the historical returns of different asset classes when setting your financial goals. For example, stocks and bonds have returned about 8% and 7% annually over the past 20 years.* Treat any outperformance as a bonus. Remember — time is your ally! By focusing on long-term results, you'll find it easier to ride out short-term volatility.

2. Be Disciplined
Often the most successful portfolio managers are those that follow a proven investment process. The key is that they choose an investment discipline and adhere to it. By establishing a clear financial plan, you'll have a logical framework for your own financial decisions.

3. Invest Responsibly
Define your objectives and risk tolerance, and consider them hard-and-fast parameters. While making big bets can sometimes reap big rewards, they often lead to steep losses instead. Smart portfolio managers always seek to optimize the balance between risk and reward.
4. Understand What You Invest In
If you can't explain in simple terms why you're investing in a particular security, you should rethink the investment. And you should always have a clear understanding of any risks involved. Your financial advisor should prove an invaluable resource along these lines.

5. Stay Diversified
No one can predict the next top-performing asset class. That's why the importance of asset allocation is virtually undisputed. To achieve broad diversification, you should invest your assets across different sectors and industries as well as different asset classes. Remember to periodically rebalance to target the proper mix. Keep in mind that diversification does not ensure a profit or protect against loss in declining markets.

6. Know the Value of Professional Advice
An increasingly complex investment climate has made it challenging for investors to try to go it alone. That's why more and more investors are turning to professional management. A financial advisor can also help you construct a solid financial plan, make sound investment choices and guide you through times of volatility.


http://www.allianzusa.com/investments/investing-insights/timeless-investing-principles/ SHARE IT TO YOUR FRIENDS!

1 comment: